Saturday, April 09, 2011

Inequality and the promise of growth

Economic growth promotes social stability by keeping the lid on revolution through the promise of wealth: one day, if only you keep working hard, you too can be rich.

Growth as the price of stability has enabled the pressing question of justice and equity to be deferred, since even if the rich are getting obscenely rich, at least all have the promise of betterment in a rising economy. But take away the expectation of growth, and the disparities of wealth become more pressingly obvious.

The same effect is realised when growth is confined to the rich. When Hosni Mubarak become Egyptian president in 1981, about twenty percent of the population lived on less than US$2 per day. After three decades during which Egypt experienced annual economic growth rates of seven per cent or more, at the time of the revolution, about forty percent lived on less than US$2 per day. There had been extraordinary growth, but the benefits went to the elite without "trickling down".

During those same three decades, the income of the bottom 90% of US workers has remained flat while that of the top 10% has skyrocketed. At the same time, the rich have successfully shifted the tax burden onto the rest. Again, the benefits of growth have not been a larger pie to be shared amongst all, but have increasingly lined the pockets of the most powerful, multiplying their power.

But not everywhere has the same story. China's boom has seen hundreds of millions move out of absolute poverty. Indeed, never before have so many escaped the burdens of grinding need in such a short space of time. Nonetheless, it has again been the richest who have benefitted the most and inequality in China is higher than anytime since the revolution. And political stability may well require this growth to continue.

If the prospect of growth becomes dim (as I think it is over the next few decades), then the question of justice must come to the fore. Whether this occurs through violent and unpredictable revolution or through reform is largely the choice of each society. Few seem to be choosing the latter, however. Indeed, globally, the rich are getting richer and only seem more intent than ever to remain in control of the reins of power. That is the path of violence, not that I am advocating or condoning it.

Of course, the absolutely poor deserve the right to develop their basic economy to a level required for the possibility of living a humane life. This is nowhere near present levels of western consumption, and nations that are well above this level have a moral duty to pursue justice through planned de-growth, or rather, pursuing things that are better than growth. It is quite possible to live a more human life while (indeed often through) embracing less. A simpler lifestyle is a gift to oneself as well as one's global neighbour.

Finally, it bears repetition: the pursuit of endless growth is increasingly terrible for ecology, which after all, owns the global economy. Growth as we currently know it likely cannot continue for more than a few more decades (at best) without so severely undermining the ecological health of the planet that the economic costs of ecological degradation overwhelm any further growth. If we want to live in a stable society, let us throw off the love of money, that poisonous stimulant slowly killing us all.


Juggernaut1981 said...

I recently defined capitalism as "A system predicated on the hope that individual self-interest will result in general good."

My beef with politics, taxes & social justice is the tendency for exemptions to be made to buy favour with people who already have to give them more. Taxes should be far simpler, because then they will be more likely to be fair. A very simple no-exemption taxation system will potentially mean some people find their finances difficult. Hopefully it would result in the rich paying a fair portion of their income. However, there are vested interests and many of the rich got rich assisting others to avoid their taxes... and so on.

I would like things to be fairer, but our attempts at 'making things fair' tends to result in further disparity.

byron smith said...

Indeed, I don't think that there are simple solutions to tax issues, though I do think that tax avoidance and evasion are serious problems that ought to be treated as such, rather than being seen as "white collar crimes" or as socially acceptable.

byron smith said...

AlterNet: Why the wealthy are afraid.

byron smith said...

Frederick Solt: Diversionary Nationalism. A paper on how nationalism is used to paper over inequality based on the observation that levels of nationalistic sentiment are higher in more unequal societies.

byron smith said...

CD: Where did all the wealth go? Inequality and ecology.

byron smith said...

CD: How did Norway become an egalitarian paradise? Fascinating potted history here that I hadn't heard of before.

byron smith said...

Paul Krugman: A new gilded age.

byron smith said...

Guardian: Capitalism isn't working - Piketty.